Africa Pressures China’s Oil Deals

The Wall Street Journal reports on China’s increasingly difficult efforts to secure oil deals in African countries:

On Tuesday, Nigeria’s oil minister and a presidential spokesman said state-owned China National Offshore Oil Corp., or Cnooc, is in advanced talks with Nigeria to take over blocks that are owned by Royal Dutch Shell PLC and other companies, but are underutilized.

An official with Nigeria’s state oil company said about 20 onshore blocks were on offer and that negotiations were at a late stage with some companies, including Cnooc. He said he wasn’t sure exactly how much crude Cnooc was vying for, but that targeted investment would run into several billion dollars.

Cnooc officials couldn’t be reached for comment.

However, a Nigerian government official told Reuters that this is not true:

Nigeria is not offering oil licences currently operated by Chevron (CVX.N), ExxonMobil (XOM.N) and Royal Dutch Shell (RDSa.L) to China while renewal negotiations are ongoing, a government minister said on Tuesday.

“We are not offering leases that are up for renewal in the middle of negotiations to renew. That is not happening,” Minister of State for Petroleum Odein Ajumogobia told Reuters in a telephone interview.

He said CNOOC, China’s no. 3 oil and gas producer, was one of several state-owned Chinese companies searching for opportunities in Nigeria and elsewhere.

“We are talking to them about their quest to buy proven reserves. This is not new, this predates this administration,” Ajumogobia said.

The second half of the Wall Street Journal article focuses on the backlash facing China in Africa, as locals increasingly resent the way Chinese companies operate in their countries:

The news of the Nigeria talks followed setbacks for China this month on deals in Angola and Libya. On Sept. 8, Libya vetoed a $462 million bid by China National Petroleum Corp. for Libya-focused Verenex Energy Inc. Days later, Angola’s state-owned Sonangol said it wanted to block the sale of Marathon Oil Corp.’s 20% oil-field stake to Cnooc and China PetroChemical Corp., or Sinopec.

The setback in Angola — China’s largest African partner — is in stark contrast with the enthusiastic reception it found there five years ago, when China was launching a quest for African resources to feed its economic boom.

[…] But some in Africa are starting to find the Chinese embrace too tight. The formula of bartering oil for infrastructure initially had given China’s oil concerns a competitive advantage against Western companies, whose investors were largely unwilling to fund such projects. But those same projects have become a key factor in China’s setbacks. In particular, China state companies’ insistence on keeping local hiring to a minimum has brewed resentment.

September 29, 2009 9:42 PM
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